Westbank Continues Selling Spree With $133M Sale Of Zephyr To Crombie REIT

On Monday, Nova Scotia-based Crombie REIT announced that it had reached an agreement with prominent Vancouver-based developer Westbank to acquire the remaining ownership interest in a property the two partners completed in January 2021.

The property, known as The Zephyr, consists of 21-storey and 22-storey residential towers with a total of 330 rental units above a large commercial space anchored by Safeway, and is located between Bidwell Street and Cardero Street in the West End of Vancouver, a few blocks east from Beach Avenue and English Bay.

Collectively referred to as 1661 Davie Street, the commercial component has a legal address of 1611 Davie Street and is owned under 1600 Davie Commercial Holdings Inc., while the residential component has a legal address of 1181 Cardero Street and is owned under 1600 Davie Residential Holdings Inc.

BC Assessment values the two parcels at $46,819,000 and $198,013,000, respectively, for a total valuation of $244,832,000.

According to its announcement on Monday, Crombie REIT owned the commercial space and a portion of the residential space and will acquire the remaining 50% ownership interest in The Zephyr for $133 million. The acquisition is expected to close in October 2024, subject to Competition Bureau approval.

"We are pleased to announce that upon closing of this transaction, Crombie will become the sole owner of one of Canada's premier rental residential assets," said Crombie REIT President & CEO Mark Holly. "Zephyr is in one of the country's top markets and further enriches the quality of our rental residential platform. The acquisition delivers on our strategy of optimizing our portfolio and to own and operate high-quality assets in vibrant community hubs that serve the everyday essential needs of Canadians. Our strong financial condition allowed us to pursue this important opportunity providing immediate recurring cash flow with significant future growth potential."

Crombie REIT and Westbank are currently working together on the redevelopment of the Safeway located adjacent to Commercial-Broadway Station in Vancouver, which has been in the planning stage for over five years now and has gone through a series of revisions.

Westbank's Selling Spree

The Zephyr at 1661 Davie Street in Vancouver. / Henriquez Partners Architects

In Fall 2023, STOREYS reported that contractors on eight Westbank projects in Vancouver, Toronto, and Seattle had filed construction liens, claiming unpaid fees. Westbank denied that it was facing insolvency and none of its properties have been placed under receivership or foreclosure to date. In the time since then, however, the company has been on an extensive selling spree in what appears to be a focused attempt to secure capital while reducing debt.

In March, Westbank sold majority ownership stakes in both the Deloitte Summit office tower in Vancouver and the 19 Duncan mixed-use tower in Toronto to its partner in those projects, Allied Properties REIT. The transaction saw Allied Properties REIT convert a portion of a loan it made to Westbank into equity and left Westbank with just a 10% and 5% stake in the two projects.

This past summer, Westbank sold The Pendrell — a 21-storey rental tower located at 1770 Pendrell Street, less than a block away from The Zephyr — to CAPREIT for $137 million, as first reported by STOREYS. In its announcement, CAPREIT said that it was also assuming the existing $64.1 million mortgage.

In Monday's announcement about their acquisition of The Zephyr, Crombie REIT said that it would also assume the additional 50% of the existing mortgages, which total to approximately $89 million, have a remaining term of over three years, and carry a blended interest rate of 3.4%.

All three of these transactions entailed Westbank selling debt-carrying properties it completed within the past decade to a REIT. According to Westbank Living's website, the only rental properties in Vancouver that now remain in its portfolio are Blood Alley (62 rental units, 80 non-market rental units) and Vancouver House (375 strata units and 106 rental units).

As first reported by STOREYS in August, Westbank also no longer owns The Lauren, a 22-storey rental tower located at 1051 Broughton Street. It is unclear when Westbank sold its stake in The Lauren. The property transacted in June as a share sale — a sale of the stake in the company that holds the property, rather than a transfer of the property — by Peterson to Starlight Investments, suggesting that Westbank sold its stake in the joint venture to Peterson first, who then subsequently sold the property to Starlight. In May, Westbank also sold two air parcels to a private buyer for a total of $12.5 million.